Oxstones Investment Club™Ever wish you could turn your love of cars, antiques or wine into a profitable pursuit? Some hobbies can make surprisingly sound investments.
By Kenneth Kiesnoski, CNBC.com
Bored of bonds? Find stocks a snooze? Some investors are turning their hobbies or interests into potentially lucrative investment vehicles.
The risks are many, but so are the potential rewards. And there are often few immediate dividends apart from emotional ones.
From art, antiques and vintage autos to whiskey and wine, here’s a look at alternative investments that do double-duty as both passions and profit-makers.
As the popularity of TV shows such as “Antiques Roadshow” proves, collecting antiques — or what’s hoped are antiques — is hardly the rarified pursuit of only the elite or erudite. With luck, that end table inherited from a great-aunt just may turn out to be worth a little something, after all.
Some once-casual collectors, however, eventually morph into serious investors, turning their appreciation of older objects into an investment strategy. However, given wild price fluctuations, a lack of regular income, high fees and the illiquidity of this type of physical asset, antiques investing is a long-term proposition more akin to investing in real estate than in securities. Park your money in antiques only if you’re prepared to sit on it — the funds, not the furniture — for a good long while.
Three lucky New Yorkers unwittingly landed potential windfalls when they bought grafitti-style artworks, priced at $60 each, from a Central Park stall this past October. Unbeknownst to them, the canvasses were by renowned, reclusive British street artist Banksy, whose works can sell for hundreds of thousands of dollars at auction.
Not many art collectors — professional or just passing through — will see that unexpectedly big a return frominvesting in fine art, but there is money to be made. Just not very quickly.
Like antiques, art is an investment for the long term. And it’s big business, worthy of its own index: the Mei Moses family of fine art indexes of art values. But according to Michael Moses, a founder of both the index and Beautiful Asset Advisors, art investing is not just for the very rich.
“There’s a painting for every purse,” Moses recently told CNBC, adding that low-priced art tends to outperform more costly works. Someone with a $500,000 portfolio could consider putting 10 to 20 percent in illiquid assets, including art, he said.
We’ve all heard a new car loses up to a fifth of its value as soon as it’s driven off the lot. But investors are nonetheless gunning their engines for classic cars, a flashy alternative asset class that jumped in value by 39 percent last year. That’s according to independent investment research house and think tank Historic Automobile Group International (HAGI), whose HAGI Top Index indicates that vintage vehicles have outperformed many other collectibles — including art, gold and wine — as investments for the past decade.
That’s because collectible classic cars are in a, well, class by themselves. The passion they inspire among avid collectors fuels sky-high bidding wars at vintage auctions and private sales. This past autumn, a 1963 Ferrari 250 GTO racer was reportedly bought for $52 million-plus, making it the most expensive car ever (re)sold.
Who doesn’t have a jar full of loose change somewhere at home? While we’re all casual numismatists on some level, collecting and eventually reselling rare coins is not only a popular pastime but also a serious investment tactic. This is, literally, making (new) money from (old) money; the market is estimated at $10 billion here in the U.S. and $100 billion worldwide, by some estimates.
As with art, antiques and other collectibles, investing in coins is a long-term proposition. The immediate risks include counterfeits, charlatans and constantly changing prices. But study the market and the materials with care and you could make a profit on your rare coins, albeit decades down the road. In the meantime, your coin collection can become a carefully collected family heirloom, connecting several generations in a shared hobby. Break open that piggy bank and poke around.
It’s no joke: Trading in comic books, once the disposable domain of teenage boys, is growing in popularity as an investment option. As comics-related characters are increasingly spun off into fortune-founding TV, movie and video game franchises, the value of rare and mint-condition comic books has risen.
In an extreme example, a single copy of the June 1938 edition of “Action Comics 1,” considered the granddaddy of the superhero genre, sold for more than $2 million back in 2011.
As investing in comic books is a relatively recent phenomenon, there’s no telling whether the segment will continue to grow or fizzle a bit like the related animation-cel market has since its late ’80s and early ’90s boom.
Not content to just buy shares of Walt Disney (DIS) or Lions Gate (LGF)? Film buffs and 15-minutes-of-fame seekers can get their own sliver of the silver screen by investing in movie-making.
Your motion picture may not turn out to be a blockbuster but, then again, you may get to walk the red carpet. Glamour is a big draw here and wise investors will be in the business as much, if not more, for the fun as for any moneymaking.
Risks include out-of-control budgets, box-office flops and — worst of all — unfinished films. So-called completion insurance, expensive but prudent, can shield against the latter.
On the plus side, today’s entertainment technologies — especially on-demand cable services — up the potential for long-term profits from the very short-term endeavor that is film production and theatrical release. Investors who can afford it take the portfolio approach, investing in more than one film at a time to spread out the risk.
Talk about literally placing a bet. Investing in racehorses entails some of the biggest highs and lows, both financial and emotional, in alternative investments, say those in the know. Well-heeled horse lovers with money to lose cough up tens of thousands, if not millions, of dollars to buy one promising animal, with an eye toward racing wins or later breeding fees — an approach akin to stock picking. They either win big or lose big.
The less affluent or daring, however, can hoof it to syndicates — think mutual funds — that pool investor money to buy a team of horses, sharing in both the considerable expenses and potentially large profits. Either way, buying into a living, breathing asset like a racehorse is a unique investment on both financial and emotional levels.
You can’t lick stamps, at least the U.S. Postal Service’s “Forever” series, as a sound investment. With rates constantly rising — stamps now cost nearly 30 percent more than they did a decade ago — stocking up on postage at today’s prices for use or resale down the road is a sure-fire, if strange, way to save money. But hoarding modern-day American stamps is just one way to “invest” in postage, precancellation.
Collecting vintage stamps, or philately, for investment purposes became wildly popular in the 1970s. Prices have slumped since then and experts differ on whether stamp-collecting for profit is still a good idea. Stamps with misprints and stamps associated with a certain historical period — say, pre-revolution Russia or colonial India — tend to rise in value and stay there. The practice has its champions and detractors but, again, the main benefit from stamp-collecting is the pleasure derived in the process.
Investing in whiskey is a relatively new pursuit. The market is smaller than that for wines, but that makes it an ideal one for trendsetters to get in on the ground floor of.
Whiskey collectors should focus on “single-barrel” whiskeys, where the supply is limited to the bottles from one cask — a supply that will diminish over time, according to Kenneth Waltzer, founder and president of California wealth-management firm Kenfield Capital Strategies.
Avoid blended spirits; they’re too consistent and collectors want something unique. All whiskeys are more consistent and stable than wines, and so are the prices. Don’t expect to toast any wild gains — or drown your sorrows over major losses — from your whiskey investment.
Some wine connoisseurs are sampling fine vintages as an investment vehicle, although the associated costs and pitfalls may give the risk-averse or less-knowledgeable among them a hangover.
Excellent wines do indeed appreciate in value with time but it’s really improved taste that interests most experts in the field. It’s best to invest in French red wines such as Burgundies and Bordeaux, which are more likely to get better with age than white wines, according to wine investor Stephen F. Lovell, who is also a certified financial planner and branch manager for LPL Financial.
Risks include capricious critics panning your vintage (leading to a loss of demand) or your wine turning out to be counterfeit — or vinegar. Maintaining and then making a profit off a wine investment takes a lot of time and treasure. And you’re not likely to beat market gains. So be sure to buy vintages that appeal to your own taste buds, because your ultimate enjoyment may come from drinking up glassfuls, not profits.
http://money.msn.com/investment-advice/could-your-hobby-make-a-good-investment
Tags: alternative asset classes, collecting antiques, collecting art, collecting classic cars, collecting comic books, collecting rare coins, collecting vintage stamps, investing in fine wine, investing in racehorses, investing in whiskey, profitable hobbies, retirement and savings